Over lease dispute, Nacho Mama's says it might leave Canton

Amid lease fight, Nacho Mama's could leave Canton, the neighborhood it helped build.

Amid a lease fight with their landlord, the owners of Nacho Mama's are threatening to leave the neighborhood the restaurant helped revitalize — and have created a social-media campaign to solicit suggestions on where the Canton stalwart should head next.

"Our lease is coming up & people are asking about other parts of the city. So you tell us, North, South, East or West?" reads the Facebook page "My Nacho Mama's."

Owners Jackie McCusker and Phil Gelso say they want Nacho Mama's to remain on O'Donnell Square after its current lease expires Aug. 31, 2016. But they and landlord John Koukides are divided on whether Nacho Mama's should pay to rehab and shift into an adjoining building and whether the restaurant should cede its liquor license to Koukides.

"We prefer the home we're in," McCusker said Wednesday. "I feel a responsibility to Canton by keeping Nacho Mama's where it is."

The parties have agreed that the new lease would raise the rent from $25 a square foot to $45 with an annual increase around 4 percent. They have not yet decided a length of the lease.

And Koukides is requiring Nacho Mama's to move from its current location at 2907 O'Donnell St.

He said the current configuration is problematic: Nacho Mama's and its carry-out pizza shop operate as a part of two different-but-adjoining properties, and he aims to have each property correspond with its proper address.

"The existing Nacho Mama's is built in the middle of two buildings," said Koukides, who cited a desire to leave the properties in proper order to his family when he dies. "We want to separate it."

But Nacho Mama's' owners say Koukides wants to configure the buildings he owns to maximize his ability to lease to bars and restaurants. A daycare in the same building as the pizza shop has been vacant for years. If tenants with liquor licenses shifted and/or expanded to take over that space, Koukides could potentially earn more from that property.

(New liquor licenses cannot be issued in O'Donnell Square because of its proximity to church and schools, so transferring an existing license is the only option for a new business.)

Gelso and McCusker said they were open to moving into the vacant space. But they differ with Koukides on who should pay for repairs and improvements the building requires even before the space could be turned into a specific use. Nacho Mama's' owners said an architect estimated it would cost between $500,000-$700,000 to abate hazardous materials, install a heating and cooling system, fix the roof, address plumbing issues and more. That doesn't include the cost to build out a full restaurant and bar.

Koukides said he had not obtained a professional estimate but said the figures from Nacho Mama's' architect was "too much."

Gelso and McCusker said they want Koukides to provide a "warm, lit shell" and that the rest of the costs to open the restaurant would be negotiated and shared between the two parties.

"We're willing to do anything that makes good business sense that other business owners would do similarly," Gelso said. "We're just not willing to do something that feels like a landlord's best interests are being put before ours and our community and our employees. We have to maintain our allegiances to [whom] we really serve."

Koukides said he did not contribute to renovations of other properties he owns — such as the spaces that house Tavern on the Square, Jasa Kabob and Vaccaro's Italian Pastry Shop — and he would not start now.

"We are here to rent," Koukides said. "We are not here to build restaurants."

Abraham Hurdle, a Baltimore commercial real estate lawyer who is not representing either party, said it is common for landlords to pay hundreds of thousands of dollars to offset costs of bringing a space up to code for a new restaurant.

"It's unusual that a long-time vacant space a successful restaurant is going into wouldn't get substantial tenant-improvement money," Hurdle said. "It's certainly uncommon if the landlord and tenant have been associated in the past."

Another sticking point: Koukides is stipulating that McCusker transfer Nacho Mama's liquor license to him at the end of the new lease. It's a requirement he said he has in place with other tenants like Tavern on the Square and Shiso Tavern. Because of the liquor licenses law, Koukides said, he does not want to be left with a bar without a license at the end of its lease.

"The building, if it doesn't have a liquor license it's no good," he said. "We have to protect our properties, too."

Tom Fidler, executive vice president and principal of Lutherville-based MacKenzie Commercial Real Estate Services, said that — without knowing all of the negotiation's details — Koukides' demands were unusual. He noted, however, that lease negotiations are typically complicated and fluid, with parties regularly making concessions of all sizes to finally strike a deal.

It is not surprising Koukides wants liquor licenses transferred to him at the end of leases given the restrictions against new licenses in Canton, Fidler said.

"Any landlord always wanted to try and look down the road 10, 15 years to try and figure out, 'What's the best decision for me?'" Fidler said. "You can't fault him for that."

Gelso and McCusker say they are stunned by the course of the negotiations. They believe Koukides underestimates the role Nacho Mama's has played in making Canton a destination and a popular neighborhood to reside.

"He thinks that another Mexican place and another pizza shop will do well in his real estate where we are," Gelso said. "I don't think he understands the power of that brand and people's loyalty and commitment to it."

Since opening in 1994, Nacho Mama's — known for its obsession with Elvis, large portions of Tex-Mex food and margaritas served in hubcaps — has been "part of the family for the community that is Canton," said Sean Patrick Flanagan, president of the Canton Community Association. When he moved to the area from Annapolis in the '90s, he said he considered only Canton — because he was introduced to the area via a date at Nacho Mama's.

"For a lot of people, they identify Canton with Nacho Mama's," Flanagan said.

When Patrick "Scunny" McCusker, Jackie's husband, died unexpectedly in August 2012, the collective mourning was palpable around the city. Mayor Stephanie Rawlings-Blake released a statement lamenting the loss of her "friend" while Canton residents paid respect in O'Donnell Square. Stickers featuring Natty Boh shedding a single tear — made in honor of Scunny — can still be seen in windows all around Canton today.

The sentimental value attached to Nacho Mama's current home cannot be overstated, McCusker said.

"People have gotten engaged there. Our employees have gotten married in Nacho Mama's," she said. "You're really taking from Baltimore when you take us out of those walls."

The Facebook page, launched last week, repeatedly asks, "Where do you want your Nacho Mama's?" but also states, "Canton is building support for us to stay on the square!," and promotes the hashtag #keepitinthe city.

On Wednesday, one commenter posted: "You can't leave the square. It wouldn't make sense!"

"Agreed," replied, "My Nacho Mama's."

Koukides praised Nacho Mama's' owners as tenants.

"I'm sorry we [didn't] come to an agreement and I'll lose them," he said. "They're very good tenants -- on time [with payment], always."

Gelso said the ball is now in Koukides' court. But on Thursday morning, Koukides said he still had no intention to change his mind on the terms.

"Let them leave," he said. "I'm not going to die for them."

Councilman Jim Kraft, who represents Canton, said Nacho Mama's is "part of the fabric of the Square," and hopes the two sides can compromise to keep the restaurant in the neighborhood.

"We don't want them to leave, and we don't believe they're going to leave," Kraft said. "I'm hopeful they'll come to something. They haven't asked me to get involved, but I'm certainly willing to."

The conversation surrounding Nacho Mama's' future in Canton has grown louder and more concerned, Flanagan said.

"No one can believe it," he said. "You can't believe there would be Canton and a Square without Nacho Mama's. It's one and the same."

wesley.case@baltsun.com

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